Sims steels itself for better times after refocusing its portfolio

Despite challenging market conditions and an overseas business sell-off, metal recycler Sims recorded an ‘improved performance’ at the start of the 2025 financial year.

Sims told investors in a market update that it expected its metal businesses to deliver earnings before interest and taxes (EBIT) of about $55m in the first quarter.

Despite challenging market conditions and an overseas business sell-off, metal recycler Sims recorded an “improved performance” at the start of the 2025 financial year after refocusing its portfolio.

Sims told investors in a market update that it expected its metal businesses to deliver earnings before interest and taxes (EBIT) of about $55m in the first quarter, with all metals businesses “on track to contribute to this good start”.

Sims earlier reported statutory EBIT of $72.6m for FY24, down 75.2 per cent on the previous year.

The company, which started operations in 1917, said North America Metal (NAM) was expected to deliver $29m in EBIT in the first quarter with a 22 per cent trading margin.

NAM’s performance builds on the improvement seen in the latter part of FY24, when it delivered EBIT of $12m in the fourth quarter following a loss of $15m in the third. Sims said the SA Recycling business’s performance remained “robust”, with its 50 per cent share of earnings tipped to deliver EBIT of $24m, above its second-half FY24 performance and at a trading margin of 29 per cent.

“It is encouraging to see the improved performance of our metal businesses despite the challenging market conditions, particularly as we refocused our portfolio,” Sims chief executive and managing director Stephen Mikkelsen said.

“I’m especially pleased with the strong results in NAM, which highlight the successful execution of our strategy in a difficult market and the team’s commitment to organisational adjustments.”

Sims said Australia and New Zealand Metal continued to face challenging market conditions, including increased Chinese exports into Asia and a slowdown in the domestic market.

It said while its estimated EBIT contribution of $13m for the first quarter of FY25 was below the second half of FY24, it marked a solid start to the year with an expected trading margin of 27 per cent for the quarter. Sims shares closed at $9.69 on August 12 – the lowest since 2020 – but over the past five weeks they have recovered. On Thursday the stock rocketed 12.4 per cent higher to close at $12.40.

In the 2024 financial year Sims sold assets as part of a strategic reset to survive the toughest economic conditions for the industry in a decade.

It offloaded its British metal recycling business to Unimetals for £195m ($385m). Its bottom line will be bolstered by a further $50m after the company agreed to sell its remaining interest in New York circular economy business CLP Circular Services. The sales have coincided with the divestment of Sims’ 50 per cent stake in an Australian LMS Energy, which harvests gas from rubbish dumps.

RBC Capital Markets analyst Owen Birrell said it was a positive start to the year for Sims, “but still a long way to go”. “We note that the update is for 1Q25 only,” he told clients. “With the challenging macro environment expected to continue for some time, we are reticent to get too overly positive on the back of today’s update, but will be watching the outlook carefully.”